What is the Tax Cap on the Employee Health Care?

When Americans receive their health care coverage through an employer, the cost of that coverage is not treated as taxable income or wages to the employee. In other words, the cost of the coverage is “excluded” from an employee’s taxable income. Some in Congress want to tax employees on the cost of their health care benefits if the cost of coverage exceeds new thresholds set by Congress. This tax on employees is called “capping the exclusion.”

More than 177 million Americans – including retirees, low- and moderate–income families, public safety officers, clergy, small business owners – currently depend on employer–sponsored health coverage. Capping the exclusion directly threatens this coverage.

Capping the exclusion is a direct tax on employees and their health care.

Capping the exclusion will result in higher deductibles and more out-of-pocket costs.

Just like the unpopular 40% “Cadillac Tax,” the tax cap targets those who work for employers that employ higher numbers of older workers, women, or those with larger families or family members with chronic or acute illnesses. Employers in high-cost areas or in specific industries, such as manufacturing or law enforcement, are also threatened.

Employers typically pay, on average, 82% of the cost of coverage. Taxing this coverage could undermine the core of American’s health care coverage.

Capping the exclusion could tax even more Americans than the unpopular 40% “Cadillac Tax.”

Don’t Tax My Health Care.

The Alliance to Fight the 40 | Don’t Tax My Health Careis a broad-based coalition comprised of businesses, patient advocates, employer organizations, unions, local governments, health care companies, consumer groups and other stakeholders that support employer-sponsored health coverage. This coverage is the backbone of our health care system and protects over 177 million Americans. The Alliance seeks to repeal the 40% “Cadillac Tax” on health benefits and work with Congress and the Administration to prevent increased income taxes on workers, families and retirees who rely on employer-sponsored health coverage. The Alliance is committed to ensuring that employer-sponsored coverage remains an effective and affordable option for working Americans and their families.